Pew Research data shows that from 1991-2021, income distribution still had not changed much. The percentage of adults with low incomes increased from 25% to 29%, with upper incomes increased from 14% to 21%, and middle incomes decreased from 61% to 50%. Former Federal Reserve Chair Ben Bernanke, in a speech at the European Central Bank on June 26, 2017, stated that since 1979, per capita real output (inflation adjusted) in the U.S. increased cumulatively by 80%, but real median weekly earnings of full-time workers grew only 7%. Bernanke stated that “despite economic growth, the middle class is struggling to maintain its standard of living.” The U.S. Census Bureau uses the Gini Index to measure income inequality across households, ranging from 0 (perfect equality) to 1 (perfect inequality). The U.S. Gini Index has increase 8.8 % from 1993-2021, thus increasing income inequality. Utah has the lowest income inequality as measured by the Gini Index.

Capitalism, free market and economic growth have not solved this serious problem, as some free market hopefuls and supporters of capitalism had hoped. The rising tide (economic growth) has not lifted all boats in the $26 trillion economy. Bernanke states, “high inequality tends to impede economic mobility by increasing the relative educational and social advantages of those in the upper percentiles.” Government transfer payments and taxes have not made much dent in the distribution of income among households. As professor Joseph Stiglitz, Nobel laureate, argues in “Price of Inequality” (2013), crony capitalists and deep-pocketed elites engage in rent-seeking behavior. They lobby for political favors such as subsidies, favorable taxes and lax regulations to monopolize industries, which undermines competition to increase profits, thus corrupting the political process.

The land of opportunity is not working for a significant proportion of low- and middle-income Americans. Economic opportunity hypothesis has been comprehensively investigated and empirically verified by professor Raj Chetty and his colleagues. In one such study (American Economic Review, April 2016), they find that children below 13 in low-income and poor families, and in poor neighborhoods, if given the opportunity to live in less poor neighborhoods, have greater chance of success in attending college, having higher earnings in adulthood, getting married, living in better neighborhoods and increasing generational social and economic mobility. Policies that support such opportunities for young children will pay large dividends to the taxpayers. This finding highlights the importance of social capital in higher-income neighborhoods, with social networks and support systems with mentors to provide the opportunity to poor children to grow with the seeds of success.

Free market competition is threatened as the gains of economic growth become more concentrated in companies and among elites. The study by G. Grullon, et al, from New York University (www.stern.nyu.edu, April 2017) finds that 75% of industries in the U.S. have increased market power in the last two decades. Market concentration undermines competition, discourages entry of new businesses, as is currently the case, and decreases productivity. It creates distrust in free markets and democracy.

The 2020 presidential election outcome deniers among the GOP in Congress and in the electorate led to the Jan. 6, 2020, attack on Capitol Hill to stop the electoral votes, hence threatening the democratic process. Daron Acemoglu and James Robison argue in “The Narrow Corridor” (2019) that democracy across many nations and in the U.S. faces a narrow corridor with challenges to maintain the balance of power between the government and the society. To keep the democracy in the corridor, diverse coalitions of Americans must “leverage social mobilization” to curtail political favors to deep-pocketed corporations and elites that deprive the rest of the society. Survival of democracy requires that Americans become civically involved and demand that government policies, private and public institutions, and free markets empower all Americans across the income and wealth spectrum.

Mathur is former chair and professor in the Economics Department and now emeritus professor at Cleveland State University, Cleveland, Ohio. He resides in Ogden.